If you own a condo in Downtown Toronto, you have likely heard about two different housing taxes: the City’s Vacant Home Tax and the federal Underused Housing Tax. They sound similar, but they work very differently. Understanding both can help you avoid penalties, plan your leasing strategy, and decide whether to hold, rent, or sell.
Why these two taxes matter
Two separate tax systems can create confusion, missed filings, and costly surprises. The City’s Vacant Home Tax looks at whether your Toronto property sat empty. The federal Underused Housing Tax focuses on who owns the property and how it is used across Canada. Each has its own rules, exemptions, and deadlines, and one does not replace the other. The City outlines how its Vacant Home Tax works, including annual declarations and exemptions, while the CRA explains how the federal Underused Housing Tax applies to certain owners, especially non‑residents and some entities (City of Toronto Vacant Home Tax overview; CRA Underused Housing Tax main page).
This guide breaks down both taxes in plain language, shows where they differ, and gives you a simple system to stay compliant. For personal advice, pair these steps with guidance from a qualified tax professional.
Vacant Home Tax essentials
Toronto’s Vacant Home Tax is a municipal program designed to discourage homes sitting empty and to support local housing initiatives. It applies to residential properties within the City of Toronto. Owners declare occupancy status each year. If your property is determined to be vacant and no exemption applies, the City may bill you under the program. The City explains the program purpose, declaration rules, exemptions, and administration on its site (City VHT program page).
Keep your records tidy. Simple steps like saving copies of leases and utility confirmations can prevent headaches if the City asks for proof. The City may request documentation and audit declarations, and there are fines for false or missed declarations (City VHT declaration and evidence guidance).
What triggers liability
At a high level, liability is tied to whether your Toronto property was considered “vacant” during the calendar year. The City looks at occupancy over time and has rules around what counts as occupied, such as principal residence use or qualifying tenancies. Always verify the specific criteria on the City’s site because details, definitions, and acceptable proof can change (City VHT declaration rules).
Who is affected
Most Toronto residential property owners must make an annual declaration, even if they live in the unit. Owners with second homes, pied‑à‑terres, or investment condos are more likely to face questions about occupancy. Ownership structure matters too. If a property has multiple units under one roll number, or if there are multiple owners, declaration responsibilities can be nuanced. Review the City’s guidance for your exact situation (City VHT program page).
Declarations and timelines
The City runs a yearly declaration period. Missing it can lead to a “deemed vacant” status and penalties. Put reminders on your calendar, keep your confirmation number, and store a PDF of your submission. The City posts current declaration windows and process updates each year (City news release on declaration period).
Exemptions overview
Common exemption themes include principal residence, hospital or long‑term care stays, death of an owner, major permitted renovations, title transfers during the year, certain employment circumstances, and court orders. Every exemption requires evidence. Gather documents early and keep them organized so you can respond quickly if the City requests proof (City exemptions and evidence).
Underused Housing Tax essentials
The Underused Housing Tax is a federal annual tax administered by the CRA. It aims to address vacant or underused housing across Canada and applies mainly to non‑resident, non‑Canadian owners and certain entities. Many Canadian owners are excluded from filing, but some structures and situations still require a return even when no tax is owed. The CRA provides detailed guidance on who must file, how to calculate tax if payable, and which exemptions might apply (CRA UHT main page).
Accuracy matters. The CRA looks closely at ownership details, percentages, and how value is determined if tax is owed. They also set out documentation and record‑keeping expectations (CRA calculation and record guidance).
What triggers liability
UHT liability depends on your ownership category and how the property was used during the year. Certain owners must file even if the property was in use or would qualify for an exemption. Start by confirming whether you are an “affected owner” under CRA rules and then assess exemptions (CRA UHT main page).
Who is affected
Non‑resident, non‑Canadian individuals, and some partnerships, trusts, and corporations may need to file UHT returns. Do not assume you are exempt because the unit is rented or because you are a Canadian taxpayer for other purposes. Ownership structure and the capacity in which you hold title can change your filing status (CRA calculation and owner guidance).
Declarations and timelines
The UHT has its own yearly filing cycle and penalties for late or missed filings. The CRA has offered transitional relief in early years, but you should plan as if standard deadlines apply and set separate reminders from any City timelines (CRA transitional relief notice).
Exemptions overview
Exemptions cover themes like primary residence, qualifying occupancy, vacation properties in eligible areas, new construction, and certain uninhabitable periods. Even if an exemption applies, some owners must still file a return. The CRA details the rules for qualifying occupancy periods and other exemptions in its technical notices (CRA qualifying occupancy exemption; CRA vacation property exemption; CRA primary place of residence exemption).
Vacant vs Underused: key differences
These are two separate regimes with different goals and playbooks. The CRA notes that municipal vacancy taxes and the UHT are distinct programs. An exemption under one does not mean you are exempt from the other. Review each set of rules independently (CRA UHT main page).
Ownership and scope
- Vacant Home Tax: City of Toronto program, applies to residential properties located within Toronto’s boundaries. Nearly all owners must submit an annual occupancy declaration for their Toronto property, regardless of residency status (City program overview).
- Underused Housing Tax: Federal program, applies to residential properties across Canada. Filing focuses on specific ownership categories and structures. Many Canadian owners are excluded from filing, while some non‑resident individuals and certain entities must file (CRA UHT main page).
Occupancy tests and exemptions
- Vacant Home Tax: Looks at how the property was used within the year and whether it meets occupancy tests or qualifies for a City exemption (principal residence, permitted renovations, certain life events, and more). Evidence is critical (City declaration and exemptions).
- Underused Housing Tax: Focuses on who you are as an owner, plus how the unit was used. Exemptions may apply for qualifying occupancy, primary residence, vacation properties in eligible areas, new construction, and other situations. Filing can still be required even when exempt (CRA exemptions).
Filing and deadlines
- Vacant Home Tax: One City declaration per year for your Toronto property. Missed declarations can lead to a deemed vacancy and penalties. The City publishes declaration windows and payment processes annually (City declaration period update).
- Underused Housing Tax: A federal return may be required each year for affected owners, even if no tax is owed. Penalties apply for late or missed filings (CRA deadlines and penalties).
Rates and penalties
Rates, valuation methods, and penalties are all different between the two systems and can change over time. The safest path is to confirm the current City rate, valuation basis, and fees on Toronto’s site and the current federal calculation and penalties on the CRA’s site before making decisions (City program details; CRA calculation and penalties).
Common owner scenarios
Use these quick scenarios to stress‑test your plan. They are examples, not legal advice. When in doubt, confirm with the City and CRA resources and speak to a tax professional.
Primary residence vacancy
You leave Toronto for a temporary work assignment or extended travel. Keep proof that the condo remains your principal residence if you plan to rely on that status. Save documents like utility bills, identification addresses, and mail records. Still make the annual City declaration on time and keep a copy. If federal filing rules apply to you, assess whether a UHT return is required and if an exemption fits your facts (City guidance; CRA primary residence exemption).
Non‑resident investor turnover
Your unit sits between tenants for a few months while you repaint and re‑lease. Track dates, showings, listing screenshots, and the new lease. These records help demonstrate intended occupancy and support exemptions where available. For the UHT, confirm if you are an affected owner and whether your rental activity meets qualifying occupancy or other exemptions (CRA qualifying occupancy). For the City, maintain proof of tenancies and any renovation permits if applicable (City evidence examples).
Corporate or trust owners
A corporation or trust owns the condo as part of a small portfolio. Even if the unit is leased, the UHT may still require a filing due to your ownership structure. Confirm ownership capacity, percentage, and whether you are an affected owner. Keep board resolutions, trust documents, and property files in one place. The CRA outlines calculation rules and record‑keeping needs for different ownership capacities (CRA calculation guidance).
New purchase or estate
You closed late in the year, or you are administering an estate. Transitional periods can be messy. Flag both systems early: complete the City declaration, gather closing documents, and review federal filing needs for the owner type. If renovations limit occupancy, keep permits and contractor records. The City and CRA both require documentation to support special circumstances (City exemptions and documents; CRA notices and exemptions).
Compliance checklist and calendar
Stay on top of both systems with a simple routine.
Documents to keep
- Occupancy evidence: utility bills, ID and mailing address records, insurance, and move‑in/move‑out notes
- Leasing files: signed leases, rent receipts, advertising screenshots, MLS listings, and showing logs
- Property records: building permits, contractor invoices, renovation timelines, and status certificates
- Ownership documents: title, corporate or trust records, minutes or resolutions, and closing packages
- Declaration confirmations: PDFs and reference numbers for City and CRA filings
Annual reminders to set
- City of Toronto Vacant Home Tax declaration window and any payment due dates (City declaration info)
- CRA UHT filing deadline for affected owners and any payment dates (CRA UHT page)
- A mid‑year check to tally occupancy days, renew leases, and update marketing plans if a vacancy is likely
- A year‑end file sweep to export utility histories, pull permits, and save records to a dated folder
- A meeting with your accountant to confirm filing needs and any changes to exemptions
Who should help
- Accountant: confirms filing status, prepares UHT returns, and advises on exemptions
- Lawyer: reviews ownership structures, estates, and documentation for complex cases
- Property manager or leasing advisor: accelerates tenant placement and maintains records
- Real estate advisor: assesses rent potential, carry costs, and sale timing if you are considering an exit
Optimize: hold, rent, or sell
Your best path depends on carry costs, risk tolerance, and lifestyle goals. Use a simple framework:
Cost‑benefit framework
- Estimate 12–24 months of carrying costs and likely rent or sale proceeds.
- Assess exposure under both tax systems based on how you plan to use the unit.
- Stress‑test with a slower lease‑up, modest rent, or a longer renovation to see how your plan holds up.
Rental pricing plan
- Review comparable leases and set a target tenant profile.
- Prepare the unit for market: light updates, professional photos, and a clear listing.
- Tighten your leasing timeline to reduce vacancy days. Pre‑market if your current tenant is leaving.
Exit strategy timeline
- If selling, plan your prep, staging, and listing window around declaration cycles.
- Line up status certificate, minor repairs, and photography early.
- Keep your City declaration and any CRA filings current so buyers and lawyers see clean, organized files.
Partner with a local advisor
A process‑driven advisor can help you map obligations, reduce risk, and improve your outcome whether you decide to hold, rent, or sell. If you want clarity on value, rent potential, and timing, start with a conversation and a data‑backed plan. Get your free home valuation with OwnIt.ca. We pair high‑touch service with disciplined execution so you can move forward with confidence.
FAQs
Do I need to file for both taxes?
- They are separate systems. Many Toronto owners must make a City declaration each year. Only certain owners must file a federal UHT return. Check both sets of rules: City VHT and CRA UHT.
If I am exempt from one, am I exempt from the other?
- Not automatically. The CRA notes municipal vacancy taxes and the UHT are different regimes. Evaluate each independently (CRA UHT overview).
What records should I keep to support occupancy?
- Leases, rent receipts, utility bills, move‑in/move‑out notes, marketing screenshots, permits, and declaration confirmations. The City and CRA can request evidence (City documentation; CRA guidance).
I own through a corporation or trust. What should I know?
- Structures can change your UHT filing status even if no tax is owed. Confirm whether you are an affected owner, your ownership percentage, and record‑keeping needs (CRA calculation guidance).
How do short‑term rentals affect my position?
- For the City, occupancy is assessed over the year and certain tenancy terms may count as occupied. For the UHT, qualifying occupancy rules have specific criteria. Track days and keep written agreements where required (City rules; CRA qualifying occupancy).
Where can I check current deadlines and penalties?
- City declaration windows and program updates are posted by Toronto each year. Federal filing deadlines and penalties are on the CRA site. Always verify the latest information before you file (City update; CRA penalties and calculations).
